Stock market

Stock trading

Traders are divided into aggressive and conservative ones.

The former select assets with dynamic changes in value. The latter select тут тоже select activities with the least risk-taking instruments. For most, equity trading is seen as an opportunity to earn with little chance of losing a deposit. Securities of this type are usually owned by large enterprises, which rarely fail and are more profitable.

How do you make money in stock trading?

The choice of stock trading has several reasons:

  1. The psychological reason. It gives investors tangible guarantees of return.
  2. All securities have liquidity thanks to material goods: the real estate of the enterprise, its raw materials and inventory.
  3. Stock prices do not depend directly on the value of currencies, commodity stocks (trade is less dependent on intervention on currency pairs for lack of correlation).
  4. Individual companies (as opposed to national currencies) may not be affected by a crisis in a country or on the world market.
  5. Investments in the assets of large companies are easier to predict than changes in the market of cryptocurrency or precious metals.

You can learn how to trade stocks from scratch using a demo account. The approach makes it possible to study the main trends and to find an effective method of earning money. And all of that without the risk of losing real money. Any loss or gain remains virtual.

Trade strategy testing

Beginners are more likely to seek conservative ways of making a profit. Creating and using a pre-established strategy is a different story. That’s why they say it’s easy to start trading stock market shares. But that doesn’t mean you can start without training. In order to easily multiply deposit funds, it is recommended first to carry out testing in demo accounts.

And virtual exchange trading of shares should be conducted under the same conditions that the trader plans to create for this account. Asset selection, sales/purchases — all activities of the investor are emulated on the basis of the subsequent transition to real money. This approach drastically reduces the risk of error.

How can stock trading risks be reduced?

The stock market bears the same risks as Forex or Cryptocurrency exchange. In addition to the trader’s own misdeeds, trading in the stock market can result in losses due to external factors such as withholding of profit payments. There is a number of rules that can reduce the risk of such events:

There is no point in conducting transactions without market analysis — it is recommended to make it a rule to read forecasts and to try to understand how the market works yourself.

Before creating a large deposit it is necessary to be sure of the reliability of the broker: by feedback or on own experience. Work with a small amount.

Even during the demo account phase, you need to practice using indicators, scripts, automatic advisors.

All that remains is to develop a profitable investment portfolio and regularly optimize it.

Portfolio development

The key criterion in a successful trade is considered to be the ability to diversify risks. Traders allocate investments between different assets and they try to find ones that do not directly correlate between them. But if this condition is not met, reciprocal transactions are made, allowing to earn on any movement (either up or down). In creating lessons on stock trading for beginners, the focus is on creating an entire portfolio.

Recommended structure:

Ideally, the overall portfolio index should follow the growing trends for all assets. If a stock is cheaper, the trader replaces it with another. If the total profit allows, the composition can be kept constant, compensating for the losses of some by the profit of others. On the first day of each month, it is desirable to have an estimated rate of return.

Equity portfolio management methodologies

When trading shares in a company with a world name, it is often known beforehand at what events its liquidity increases and when it may decline. Small businesses make it harder to predict. Rebalancing (a mathematical way of managing returns) is used to simplify portfolio management.

The methodology involves the following rules:

At the time of creation of the investment portfolio, each type of equity is allocated a share of the stock (in percentage).

The checks are carried out strictly on schedule (every month, quarter and half-year).

The calculation compares the amount invested in each asset against current quotes (in the currency of the investments).

Any deviation from the original value requires correction.

The cheaper shares are bought out to the required amount and the higher shares are sold. The balance sheet is constantly changing in quantitative terms, payments are made only in the currency of the deposit. Under such an approach, equity trading on stock exchanges could become an instrument of earnings with a constant level of profit. Once the intended profit has been achieved, the portfolio can be realigned and re-formed (partially or fully).

Can trade be simplified?

Maximum profits can be obtained by trading the best shares at price and volatility. When opening a transaction manually, the trader has to constantly monitor the market. The more the price changes, the more careful you have to follow them. But there is a way. If you have a proven trading strategy, they automate it.

The procedure is as follows:

It remains to observe the work of the adviser and to adjust it as necessary. A trader may need to intervene if he decides to close any deals early, exit the market entirely to build a new portfolio.

Thanks to this trading of shares for «dummies» becomes possible. It is known that newcomers are often let down by emotions, irrational decisions. As the trader acquires experience it is possible to set automatic trade operations part. For example, choose the assets traded, the volume of orders and other parameters by yourself. And let the software do any routine operations. For example, closing transactions after reaching a given level of profitability.